8. Market Failures. Flashcards
Marginal Private Cost.
The cost to an individual or firm of an economic transaction.
Marginal external cost.
The spillover costs to third parties of an economic transaction.
Marginal social cost.
The full cost to society of an economic transaction, including the private and external costs.
Marginal private benefit.
The benefit to an individual or firm of an economic transaction.
Marginal external benefit.
The spillover benefit to third parties of an economic transaction.
Marginal social benefit.
The full benefit to society of an economic transaction, including private and external benefits.
Positive externality.
A positive spillover effect to third parties of a market transaction.
Ex ante.
A term that refers to future events.
Ex post.
A term that refers to after the event.
Merit good.
A good that would be under consumed in a free market, as individuals do not fully perceive the benefits obtained from consumption.
Information failure.
Where economic agents do not properly perceive the benefits of costs of a transaction.
Partial market failure.
Where the free market provides a product but will a misallocation of resources.
Demerit good.
A good that would be over consumed in a free market, as it brings less overall benefit to consumers as they realise.
Public good.
A good which is both non-excludable and non-rivalry in consumption.
Free rider problem.
Where some consumers benefit from other consumers purchasing the goods. (Street lighting)
Externalities
Costs or benefits that spill over to third parties external to the market transaction.
Quasi-public good.
A good that has some of the quantities of a public good but does not fully posses the two required characteristics of non rivalry and non excludability.
Private good
A good that is both excludable and rival in consumption.
Complete market failure.
Where the free market fails to provide a product at all.
Occupational immobility
As patterns of demand and employment change, many workers may find it difficult to easily secure new jobs, since they lack the necessary skills.
Geographical immobility.
Where workers find it difficult to move where employment opportunities may be, due to family and house prices.
Income.
A flow of earnings to a factor of production over time.
Wealth.
A stock of owned assets.
